Intuitive Surgical Found Not Liable For Doctor’s Training In Lawsuit

Intuitive Surgical’s (NYSE:ISRG) stock shot up 5% last Friday after the maker of the da Vinci robotic surgical system won a lawsuit, which alleged that the company was negligent in training a doctor to use the da Vinci system, leading to death of a patient. The jury, however, did not agree with the plaintiff’s claim and held that Intuitive Surgical was not liable for it. [1] This was the first of 26 similar lawsuits that were filed against Intuitive Surgical and could direct the outcome of other pending lawsuits. This comes as a slight boost for Intuitive Surgical as it has been going through a hard time after a series of negative reports.

In December 2o12, a report from an influential short selling firm Citron Research highlighted many incidences of deaths and injuries and a growing number of product liability lawsuits relating to the da Vinci system. [2] This was followed by an increase in complications reported to the FDA. While the FDA said the number of complications reported are small compared with the total surgeries performed, it initiated a survey with surgeons at major hospitals to list complications witnessed and training required for the surgical system. This compounded investor fears that these allegations could prove true and hurt the system’s sales going forward. The stock corrected over 25% following these concerns. The latest verdict will help alleviate such concerns while lending support to the stock price.

However, a huge surge in the stock price will be capped by the recent cost benefit concern. A recent comprehensive study by Columbia University suggested that da Vinci hysterectomies cost significantly higher than the standard minimally invasive procedure called laproscopic hysterectomy, and that too without any major benefits. This was followed by similar observations from the American Congress of Obstetricians and Gynecologists, an influential group that represents over 56,000 U.S. physicians (read our note here for full details).

While it is too early to gauge the impact of these events, it is feared that the mounting concerns could drive hospitals and open surgery patients toward more cost-effective laparoscopic hysterectomies. This could in turn hamper the number of procedures going forward, resulting in lower revenues from instruments and accessories.

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